Corporate Governance Report
Last Update: June 27, 2023

PACIFIC METALS CO., LTD.
Masayuki Aoyama
President and Representative Director
Phone: +81-3-3201-6681
Securities Code: 5541
https://www.pacific-metals.co.jp/en/
The corporate governance of PACIFIC METALS CO., LTD. (the “Company”) is described below.

I.

Basic Views on Corporate Governance, Capital Structure, Corporate Profile andOther Basic Information

1. Basic Views
The Company has established the following company policy based on its company philosophy: “Leverage
the power of people to deliver the earth’s resources in more useful forms and contribute to the happiness ofhumankind.”
1. Integrate the management strategies of the entire Group to maximize the synergy effects of each Group
company.
2. Focus on the development and quality improvement of world-class smelting technology, and establish
the world-leading platform for management efficiency and competitiveness.
3. Promote compliance.
4. Secure appropriate profits through fair, transparent and free competition.
5. Actively tackle all environmental problems to protect the irreplaceable earth.
6. To develop the individuality of employees and fully demonstrate their creativity, pursue a sense of
comfort and affluence both physically and mentally, and realize a rewarding workplace.
7. Promote wide-ranging exchanges with society and actively disclose fair corporate information.
Based on the company philosophy and policy, the Company will enhance its corporate governance as
described below to achieve sustainable growth and increase its medium- to long-term corporate value.
(1) The Company shall respect the rights of all shareholders and ensure equality.
(2) The Company shall collaborate with all stakeholders, including shareholders, consumers, business
partners, employees, and local communities, sincerely and appropriately, considering their interests.
(3) The Company shall proactively disclose information that could serve as a basis for investment
decisions, in addition to disclosing information appropriately in compliance with relevant laws andregulations.
(4) The Company’s Board of Directors shall be responsible for achieving sustainable growth andmaximizing medium- to long-term corporate value based on its fiduciary responsibility to shareholders.
To this end, the Company shall establish a fair and transparent management structure by introducing an
executive officer system to separate decision-making and business execution functions and bystrengthening the business execution supervisory function through the appointment of outside officers(outside directors and outside auditors).
(5) The Company shall engage in constructive dialogue with shareholders to achieve sustainable growthand maximum medium- to long-term corporate value.
The Company has formulated the “basic policies on corporate governance” and posted them on its website:
https://www.pacific-metals.co.jp/en/ir/governance.php-1-[Reasons for Non-compliance with the Principles of the Corporate Governance Code] UPDATED
The following description is based on the Corporate Governance Code revised in June 2021.
[Supplementary Principle 2.4.1: Ensuring diversity, including active participation of women]
The Company has been striving to ensure diversity in the workplace, including promoting the active
participation of women. However, at present, the Company has yet to set any voluntary and measurable
goals. In addition, the Company has yet to codify its policies for human resource development and internal
environment development to ensure diversity. Therefore, the Company continues to work on these issues.
[Principle 5.2: Establishing and disclosing business strategies and business plans]
Having positioned strengthening of a management platform capable of responding to changes in thebusiness environment, contributing to the SDGs, and achieving carbon neutrality as important issues, theCompany has formulated and promoted its medium-term business plan in order to work on resolving theissues as well as sustainable growth and enhancing its medium- to long-term corporate value. Towardachieving the medium-term business plan, the Company has established the priority measures for solving
the problems, formulated and promoted necessary investment plan and other measures, with which theCompany appropriately allocates human and physical resources that enable implementation of the plan, andverifies the effectiveness of such investment from time to time to enhance the probability of achieving theplan. The numeric targets for financial indicators are not set as they are greatly affected by external factors
difficult to predict such as the impact from the commodity market, the foreign exchange market, andresource nationalism due to the characteristics of the business and as a new project to which smelting
technology is applied and utilized as the second pillar requires consideration over a relatively long perioddepending on its scale of investment. Regarding the progress of the medium-term business plan, its issues
and achievements are analyzed each fiscal year, its latest annual implementation plan is formulated andannounced referring to the business environment in recent times and external professional information, andits progress is explained in the Integrated Report and other documents posted on the Company’s website inaddition to the quarterly disclosure and financial results briefing sessions.

[Disclosure Based on the Principles of the Corporate Governance Code] UPDATED
The following description is based on the Corporate Governance Code revised in June 2021.
[Principle 1.4: Cross-shareholdings]
The Company holds shares of other companies as cross-shareholdings to maintain or strengthen business
relationships and enhance the medium- to long-term corporate value of investee companies and theCompany. In addition, the purpose and rationale for holding each individual cross-shareholding areperiodically verified and explained at the Board of Directors’ meetings.
Based on the results of the above verification and other factors, the Company is considering the reduction of
its cross-shareholdings in a phased manner. Since the fiscal year 2018, the Company has reduced thenumber of stocks by nine out of 25 stocks (including 14 listed stocks) that fall into “Investment shares held
for purposes other than pure investment” disclosed in the Annual Securities Report.
The Company exercises voting rights as to its cross-shareholdings after considering the business
relationships and the return from the shareholdings, as well as whether or not the proposed agenda will help
improve the corporate value of the investee company and the Company.
[Principle 1.7: Related party transactions]
In the case where the Company conducts related party transactions with Directors, subsidiaries, or otherrelated parties, the Company obtains the prior approval of the Board of Directors to ensure that suchtransactions do not harm the interests of the Company and the common interests of its shareholders. If theCompany enters into such transactions, their details are regularly reported at the Board of Directors’
meetings.
[Principle 2.6: Roles of corporate pension funds as asset owners]
The Company manages corporate pension funds under a defined benefit pension plan. Although the pension
fund management is outsourced to an external fund manager, a person in the Personnel & Labor Relation
Dept. of the Company receives reports from the fund manager regularly and has established a system thatenables timely and close coordination with the manager. Based on this system, the Company appropriately
manages conflicts of interest that could arise between pension fund beneficiaries and the Company.
-2-

[Principle 3.1: Full disclosure]
The Company proactively discloses information on the following matters:(1) Company objectives, business strategies and business plans
The company philosophy and company policy are described in Basic Views at the beginning of thisreport.
(2) Basic views and policies on corporate governance
The Company has formulated the “basic policies on corporate governance,” which are posted on the
Company’s website:
https://www.pacific-metals.co.jp/en/ir/governance.php(3) Board of Directors’ policies and procedures in determining the compensation
The “basic policies on corporate governance” of the Company describe the policies and procedures indetermining the compensation at the Company’s Board of Directors.
(4) Board of Directors’ Policies and procedures in appointing and dismissing the senior management andnominating candidates for Directors and Auditors
The “basic policies on corporate governance” of the Company describe the policies and procedures inappointing and dismissing the senior management and nominating candidates for Directors andAuditors at the Company’s Board of Directors.
(5) Explanation with respect to the individual appointments/dismissals and nominations when the Board of
Directors appoints or dismisses the senior management and nominates candidates for Directors andAuditors
Reasons for the appointment and nomination of individual candidates for Directors and Auditors arestated in the Notice of Convocation of the Annual General Shareholders Meeting. The same applies tothe dismissal of the senior management.
[Supplementary Principle 3.1.3: Initiatives on sustainability, investment in human capital and intellectual
property, etc.](1) Initiatives on sustainability
In May 2022, the Company announced its medium-term business plan, “PAMCO-2024,” which ends inthe fiscal year 2024. One of the plan’s priority measures is to enhance corporate value by diversifying
domestic businesses that contribute to a recycling-oriented society and by addressing sustainability
issues, and the Company is promoting initiatives to realize this goal. Initiatives on sustainability aredescribed in the Sustainability Report and on the Company’s website. The Company also discloses
information based on the TCFD recommendations or an equivalent framework in the Sustainability
section of its website.
(URL: https://www.pacific-metals.co.jp/en/sustainability/tcfd.html)(2) Investment in human capital, etc.
The Company believes that investment in human capital is important for enhancing corporate value byaddressing sustainability issues, which is one of the priority measures under the medium-term businessplan, “PAMCO-2024.” To realize a safe and comfortable working environment for employees, theCompany is promoting initiatives for investment in human capital, including the elimination ofoccupational accidents, promotion of the active participation of women, promotion of diversity thatshows respect for different values and ideas, and enhancement of education and training according tolevel. The Company believes that by pursuing these goals, it can improve employees’ sense of job
satisfaction and create new value.
(3) Intellectual property
The Company recognizes that intellectual property is a source of value creation and increased
competitiveness. Regarding R&D activities, which are at the heart of such a source, the Company
established the Resources & Technology Development Project Department in July 2019 to executeintellectual property investment and to make appropriate use of relevant rights. The R&D activities thatcreate intellectual property are described in the R&D Activities section of the Annual Securities Report.
[Supplementary Principle 4.1.1: Determination of the scope and content of the matters delegated to the
management]-3-

The “basic policies on corporate governance” of the Company describe the scope and content of the mattersdelegated to the management at the Board of Directors.
[Principle 4.8 Effective use of Independent Outside Directors]
In order to enhance and strengthen the management, the Company increased the number of Independent
Outside Directors by one and appointed a total of three Independent Outside Directors at the Annual
General Shareholders Meeting held in June 2021.
[Principle 4.9 Independence standards of Independent Outside Directors]
The Company discloses the independence standards of Independent Outside Directors in the Notice ofConvocation of the Annual General Shareholders Meeting, Annual Securities Reports, and “Matters relating
to independent officers” in this report.
[Supplementary Principle 4.10.1 Use of optional approach]
The Company discloses the objectives of establishment, roles, and other matters of the Nomination andCompensation Committee in the “basic policies on corporate governance” of the Company. The Company
stipulates that a majority of the members of the Committee shall be Independent Outside Directors as filedwith the Tokyo Stock Exchange and that the chairperson shall be an Independent Outside Director.
[Supplementary Principle 4.11.1 Views on the diversity of the Board of Directors as a whole]
The Company has set forth its views regarding the balance of knowledge, experience, and abilities of theBoard of Directors as a whole, as well as its diversity and scale, in its “basic policies on corporate
governance.” It also discloses a skills matrix presenting the knowledge, experience, abilities, and otherattributes of individual Directors on its Notice of Convocation of the Annual General Shareholders Meeting,
beginning with the meeting held in June 2022.
[Supplementary Principle 4.11.2 Disclosure of concurrent holding of positions by Directors and Auditors]
The Company assists Directors and Auditors in executing their duties with sufficient time spent for theCompany, and discloses their significant concurrent positions in its Business Reports every year.
[Supplementary Principle 4.11.3 Self-evaluations of each Director, and evaluation of the effectiveness of theBoard of Directors as a whole]
The Company analyses and evaluates the effectiveness of the Board of Directors as a whole to enhance thefunctions of the Board of Directors and ultimately the corporate value. In March 2023, the Company
implemented the evaluation for the fiscal year 2022 by means of a questionnaire survey performed by anoutside institution, targeting all Directors and Auditors (including Outside Directors and Outside Auditors).
The responses to the survey show that the compensation system for senior management is evaluatedpositively because compensation is appropriately determined through discussions by the non-statutory
Nomination and Compensation Committee (established in May 2021). Accordingly, the Company shared
the recognition that the Board of Directors has generally maintained a certain level of effectiveness. On theother hand, the Company also shared issues such as the need for implementation of further discussion forsenior management concerning the appropriateness of incentives and of full deliberation of businessstrategies and business plans with an awareness of aspects such as profitability and capital efficiency.
Based on the results of the evaluation of the effectiveness, the Board of Directors of the Company aims tofurther enhance the functions of the Board of Directors by thoroughly examining the policy of addressingthese issues in the future.
[Supplementary Principle 4.14.2 Training policy for Directors and Auditors]
The Company discloses the training policy for Directors and Auditors in the “basic policies on corporate
governance of the Company.”[Principle 5.1 Constructive dialogue with shareholders]
The Company enhances a system to promote constructive dialogue with all shareholders by establishing the
IR Committee led by the Director in charge of investor relations. Details are disclosed in the “basic policies-4-on corporate governance of the Company.” The implementation status and related information are describedin “III. Implementation of Measures for Shareholders and Other Stakeholders, 2. IR Activities” in thisreport.

2. Capital Structure
Foreign Shareholding Ratio

From 20% to less than 30%[Status of Major Shareholders] UPDATEDName / Company Name
The Master Trust Bank of Japan, Ltd. (trust account)
NIPPON STEEL Stainless Steel Corporation
Custody Bank of Japan, Ltd. (trust account)
STATE STREET BANK AND TRUST COMPANY 505103(standing proxy: Settlement & Clearing Services Department,
Mizuho Bank, Ltd.)BBH FOR FIDELITY LOW-PRICED STOCK FUND
(PRINCIPAL ALL SECTOR SUBPORTFOLIO)(standing proxy: MUFG Bank, Ltd.)
Tachibana Securities Co., Ltd.
JP MORGAN CHASE BANK 385781(standing proxy: Settlement & Clearing Services Department,
Mizuho Bank, Ltd.)
J.P. MORGAN SECURITIES PLC FOR AND ON BEHALF OF
ITS CLIENTS JPMSP RE CLIENT ASSETS-SEGR ACCT
(standing proxy: Direct Custody Clearing Operations, Citi Bank,
N.A., Tokyo Branch)
GOVERNMENT OF NORWAY(standing proxy: Direct Custody Clearing Operations, Citi Bank,
N.A., Tokyo Branch)Business Partners’ Shareholding Association, PACIFIC METALSCO., LTD.
Controlling Shareholder (except for Parent
Company)
Parent Company

Number of Shares
Owned
3,257,500
2,049,390
1,373,400

Percentage (%)

1,240,231

6.36

712,347

3.65

685,700

3.52

439,5722.25

430,0222.21

376,533

1.93

217,502

1.12

—
None

Supplementary Explanation—

3. Corporate Attributes
Listed Stock Market and Market Section
Fiscal Year-End
Type of Business
Number of Employees (consolidated) as of
the End of the Previous Fiscal YearSales (consolidated) as of the End of thePrevious Fiscal YearTokyo Stock Exchange Prime Market
March
Iron & Steel
From 100 to less than 500
From 10 billion yen to less than 100 billion yen

-5-

16.70
10.51
7.04

Number of Consolidated Subsidiaries as of
the End of the Previous Fiscal Year

Less than 10

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholder—
5. Other Special Circumstances which may have Material Impact on Corporate Governance—-6-II. Business Management Organization and Other Corporate Governance Systems
regarding Decision-making, Execution of Business, and Oversight in Management
1. Organizational Composition and Operation
Organization Form
[Directors]
Maximum Number of Directors Stipulated in
Articles of Incorporation
Term of Office Stipulated in Articles ofIncorporation
Chairperson of the Board of Directors
Number of Directors
Appointment of Outside Directors
Number of Outside Directors
Number of Outside Directors designated as
Independent Officer

Company with a Board of Auditors

15
1 yearPresident
9
Appointed
33Outside Directors’ Relationship with the Company (1)Name

Relationship with the Company*
c
d
e
f
g
h
i

AttributeabjShinya Matsumoto
Attorney at law
Hikari Imai
From another company
Yukari Sakai
From another company* Categories for “Relationship with the Company”* “○” when the Director presently falls or has recently fallen under the category;“△” when the Director fell under the category in the past
* “●” when a close relative of the Director presently falls or has recently fallen under the category;“▲” when a close relative of the Director fell under the category in the pastka. An executive of the Company or its subsidiaries
b. An executive or a non-executive director of a parent company of the Company
c. An executive of a fellow subsidiary company of the Company
d. A party whose major business partner is the Company or an executive of such a partye. A major business partner of the Company or an executive of such a business partner
f. A consultant, an accountant or a legal professional who receives a large amount of monetary considerationor other property from the Company besides officer’s compensation
g. A major shareholder of the Company (or an executive of the said major shareholder if the shareholder is alegal entity)h. An executive of a business partner of the Company (which does not correspond to any of d, e, or f) (thedirector himself/herself only)
i. An executive of a company, between which and the Company outside directors/auditors are mutually
appointed (the director himself/herself only)
j. An executive of a company or organization receiving a donation from the Company (the director
himself/herself only)
k. Others-7-Outside Directors’ Relationship with the Company (2)Name

Designation as Supplementary
Independent Explanation of
Officerthe Relationship

Reasons of Appointment
The Company determined that Shinya Matsumotois capable of properly performing his duties as
Outside Director based on his professional
perspective and broad insight as an attorney.
Therefore, the Company appointed him as Outside
Director in June 2013. The Company expects him
to promote the enhancement of compliance andcorporate governance, leveraging the abovementioned perspective and insight.

Shinya Matsumoto

Hikari Imai○○

He is neither the Company’s major business
partner, major shareholder, nor from these parties,
and he has not received a large amount ofmonetary consideration or other property from theCompany besides the Director’s compensation.
Also, his main profession is an attorney at law,and he does not stand in the same position as the
management team of the Company. Accordingly,
the Company has determined that he is unlikely tohave any conflict of interest with generalshareholders, and appointed him as Independent
Officer.

—

The Company determined that Hikari Imai iscapable of properly performing his duties as
Outside Director based on his extensive
experience as a corporate manager over many
years. Therefore, the Company appointed him as
Outside Director in June 2016. The Company
expects him to promote the improvement ofcorporate governance and the enhancement of thefoundation of corporate management at theCompany by leveraging the above-mentioned
experience.

—

He is neither the Company’s major business
partner, major shareholder, nor from these parties,
and he has not received a large amount ofmonetary consideration or other property from theCompany. In addition, the Company has
determined that he is unlikely to have any conflictof interest with general shareholders, andappointed him as Independent Officer.

Yukari Sakai○

The Company determined that Yukari Sakai iscapable of properly performing her duties as
Outside Director based on her extensive
experience as a corporate manager in a wide rangeof business fields. Therefore, the Company
appointed her as Outside Director. The Company
expects her to promote the enhancement andreinforcement of corporate governance based on avariety of perspectives from the viewpoint of—-8-

diversity, leveraging the above-mentioned
experience.
Although she had worked for Nomura Securities
Co., Ltd, the lead managing underwriter of theCompany, the Company believes that there is no
issue to affect her independence, because morethan 20 years have passed since her resignationfrom the company, and she does not hold any
business relationship and other relationships withthe company. She is neither the Company’s major
business partner, major shareholder, nor fromthese parties, and she has not received a large
amount of monetary consideration or otherproperty from the Company. Accordingly, theCompany has determined that she is unlikely tohave any conflict of interest with generalshareholders, and appointed her as Independent
Officer.

Voluntary Establishment of Committee(s) Corresponding toNomination Committee or Compensation Committee

Established

Committee’s Name, Composition, and Attributes of Chairperson

All Committee Members

Committee Corresponding toNomination Committee
Nomination and Compensation
Committee
4Committee Corresponding toCompensation Committee
Nomination and Compensation
Committee
4Full-time Members

00Inside Directors

11Outside Directors

33Outside Experts

0

0

Other

0

0

Chairperson

Outside Director

Outside Director

Committee’s Name

Supplementary Explanation
The Company established the Nomination and Compensation Committee on May 20, 2021, aiming at
enhancing the fairness, transparency, and objectivity of procedures for the nomination and compensation of
Directors and Executive Officers, as well as at further improving corporate governance.
In response to inquiries from the Board of Directors, the Nomination and Compensation Committee
primarily deliberates on matters related to the appointment and dismissal of Directors and other officers, thecompensation of Directors, and matters approved by other committees regarding the nomination andcompensation of Directors. The Nomination and Compensation Committee consists of at least three and no
more than five members with a majority of Independent Outside Directors, and is chaired by an Independent
Outside Director as filed with the Tokyo Stock Exchange.
[Auditors]
Establishment of the Board of Auditors
Maximum Number of Auditors Stipulated in Articles of Incorporation
Number of Auditors-9-

Established5
4

Cooperation among Auditors, Accounting Auditors and Internal Audit Departments UPDATEDRegarding internal audits, the Company has established the Internal Audit Dept. (consisting of two persons)to implement organizational and system audits, operational audits, and accounting audits, as well as the“evaluation of internal control concerning financial reports” of the overall Group, among other activities.
Regarding auditor’s audits, four Auditors led by one full-time Auditor prepare an annual audit plan andconduct audits based on the plan.
Regarding mutual collaboration among Auditors, the Internal Audit Dept., and the Accounting Auditor, theCompany holds audit report meetings four times a year to promote collaboration among them. In order topromote mutual collaboration between Auditors and the Internal Audit Dept., the Company has establishedoccasions for information exchange as needed, enabling them to check the progress of the audit plan andmake proper adjustment. In addition, evaluation results of internal audits are regularly reported to the Boardof Directors’ meetings.
Appointment of Outside Auditors
Number of Outside Auditors
Number of Outside Auditors Designated as Independent Officer

Appointed
33Outside Auditor’s Relationship with the Company (1) UPDATED
Name

Attributeabc

Relationship with the Company*d e f g hij

Ken Yasuda

From another company△

Shuzo Ikeda

From another company△

Yutaka Iimura

From another company

△

k

l

m

* Categories for “Relationship with the Company”* “○” when the auditor presently falls or has recently fallen under the category;“△” when the auditor fell under the category in the past
* “●” when a close relative of the auditor presently falls or has recently fallen under the category;“▲”when a close relative of the auditor fell under the category in the pasta. An executive of the Company or its subsidiaryb. A non-executive director or an accounting advisor of the Company or its subsidiaries
c. An executive or a non-executive director of a parent company of the Company
d. An auditor of a parent company of the Company
e. An executive of a fellow subsidiary company of the Company
f. A party whose major business partner is the Company or an executive of such a party
g. A major partner of the Company or an executive of such a business partner
h. A consultant, an accountant or a legal professional who receives a large amount of monetary considerationor other property from the Company besides officer’s compensation
i. A major shareholder of the Company (or an executive of the said major shareholder if the shareholder is alegal entity)
j. An executive of a business partner of the Company (which does not correspond to any of f, g, or h) (theauditor himself/herself only)
k. An executive of a company, between which and the Company outside directors/auditors are mutually
appointed (the auditor himself/herself only)l. An executive of a company or organization receiving a donation from the Company (the auditor
himself/herself only)
m. Others- 10 -

Outside Auditor’s Relationship with the Company (2) UPDATEDNameKen Yasuda

Shuzo Ikeda

Yutaka Iimura

Designation as Supplementary
Independent
Explanation of
Officerthe Relationship○

He is from amain financing
bank of theCompany.

○

He is from amain financing
bank of theCompany.

○

He is from amain financing
bank of theCompany.

Reasons of Appointment
The Company determined that Ken Yasuda iscapable of properly performing his duties as Auditor
based on his broad insight and wealth of knowledge
and experience as an auditor at other companies.
Therefore, the Company appointed him as Outside
Auditor.
Although he had worked for Resona Bank, Limited.,
one of our main financing banks, more than 10 years
have passed since his resignation from the bank, andhe is not in a position to be influenced by theintention of the bank. The Company has no loans
from the bank, and also deals with other multiple
banks. Accordingly, the Company has determinedthat his service at the bank in the past will not affectthe management of the Company, and he is unlikely
to have any conflict of interest with generalshareholders. Thus, the Company appointed him as
Independent Officer.
The Company determined that Shuzo Ikeda iscapable of properly performing his duties as Auditor
based on his broad insight and wealth of knowledge
and experience as a director at other companies.
Therefore, the Company appointed him as Outside
Auditor. Although he had worked for Mizuho Bank,
Ltd., one of our main financing banks, more than 10
years have passed since his resignation from the bank,and he is not in a position to be influenced by theintention of the bank. The Company has no loans fromthe bank, and also deals with other multiple banks.
Accordingly, the Company has determined that his
service at the bank in the past will not affect the
management of the Company, and he is unlikely tohave any conflict of interest with general shareholders.
Thus, the Company appointed him as Independent
Officer.
The Company determined that Yutaka Iimura is capableof properly performing his duties as Auditor based on
his broad insight and wealth of knowledge andexperience as a director at other companies. Therefore,
the Company appointed him as Outside Auditor.
Although he had worked for Development Bank ofJapan Inc., one of our main financing banks, more thansix years have passed since his resignation from thebank, and he is not in a position to be influenced by theintention of the bank. The Company has no loans fromthe bank, and also deals with other multiple banks.
Accordingly, the Company has determined that his
service at the bank in the past will not affect the
management of the Company, and he is unlikely tohave any conflict of interest with general shareholders.
Thus, the Company appointed him as Independent
Officer.

- 11 -

[Independent Officers]
Number of Independent Officers

6

Matters relating to Independent Officers
The Company has established the criteria for determining independence of its independent officers as
follows.
1. An independent officer shall be an Outside Director or an Outside Auditor with no risk of conflict ofinterest with general shareholders.
2. An independent officer shall not be a major business partner (supplier or buyer) of the Company, or adirector, executive, or auditor thereof.
3. An independent officer shall not be a consultant, an attorney, certified public accountant, or certified tax
accountant, etc. to whom the Company pays annual compensation amounting to one million yen or
more other than officer’s compensation.
4. An independent officer shall not be a shareholder of the Company.
5. An independent officer shall not be a friend of a Director or Auditor of the Company.
6. An independent officer shall not formerly or currently be:(1) A director, executive, auditor, or accounting advisor of the Company or the Company’s subsidiaries,etc.;(2) A shareholder who holds 5% or more of the Company’s shares or a director, executive, auditor of an
institutional shareholder who holds 5% or more of the Company’s shares;(3) A director, executive or auditor of the parent company of the shareholder referred to in paragraph (2)above;(4) A member of a corporation organized by a consultant, attorney, certified public accountant, certified
tax accountant, etc. to whom the Company pays annual compensation amounting to one million yen
or more other than officer’s compensation;(5) A major business partner (supplier or buyer) of the Company, or a former member of such client otherthan director, executive, or auditor thereof;(6) A shareholder who holds 5% or more of the Company’s shares, or a former member of an institutional
shareholder who holds 5% or more of the Company’s shares other than a director, executive, auditor
thereof;(7) A former member of the parent company of the shareholder referred to in paragraph (6) above otherthan a director, executive, or auditor of such parent company;(8) A member of a company whose relationship with the Company involves having outside officers fromboth parties;(9) A recipient of donations from the Company or a former member thereof; or(10) A relative within the third degree of kinship to any of the aforementioned persons.
[Incentives]
Incentive Policies for Directors

Performance-linked Compensation

Supplementary Explanation
The details of performance-linked compensation are described in “Disclosure of Policy on Determining
Compensation Amounts and Calculation Methods” of “Director’s Compensation” hereunder.
Recipients of Stock Options
Supplementary Explanation—- 12 -

[Directors’ Compensation]
Disclosure of Individual Director’s Compensation

No Individual Disclosure

Supplementary Explanation UPDATED
The total compensation amounts for Directors is 177 million yen.
The amounts of Directors’ compensation do not include the portion of employee salary for Directors who
concurrently serve as employees.
The Board of Directors’ meeting, held on May 22, 2006, resolved to abolish the retirement benefits systemfor officers, and the 80th Annual General Shareholders Meeting, held on June 29, 2006, resolved to grant
final payments in conjunction with the abolishment of the retirement benefits system. Total amounts of the
final payments in the future as of the end of this fiscal year is as follows.
A total of 6 million yen for one Auditor
Policy on Determining Compensation Amounts and Calculation Methods
UPDATED

Established

Disclosure of Policy on Determining Compensation Amounts and Calculation Methods
1) Matters concerning the Company’s determination policy on details of individual compensation andother related matters for Directors and Auditors
The Company, through the Nomination and Compensation Committee, has decided the following
determination policy on the details of individual Directors’ compensation, etc. This policy has
been established by the Board of Directors in the Officers’ Compensation Rules.
The Company’s determination policy on the details of individual Auditors’ compensation, etc. has
also been established by the Board of Directors in the Officers’ Compensation Rules.
Compensation for individual Auditors is determined through discussion between Auditors, within
the total compensation limit resolved by the General Shareholders Meeting.
2) Summary of the determination policy
i. Basic policy
The basic policy for Director’s compensation is to link the compensation system with thebenefits of shareholders in order to make the system fully functional as an incentive to pursue
the sustainable improvement of corporate value, and to determine the individual Director’scompensation at an appropriate level according to his/her responsibilities.
Specifically, Directors’ compensation consists of “basic compensation for officers” as fixedcompensation, and “bonuses for officers (monetary/stock)” as performance-linked
compensation. Regarding Outside Directors, who assume the responsibility of oversight, only“basic compensation for officers” is paid in light of their duties.
ii.

Policy concerning the determination of the amounts of individual Directors’ basic
compensation, etc. (monetary compensation) (including the policy concerning thedetermination of the timing and conditions for the payment of compensation, etc.)
Basic compensation for Directors of the Company is fixed monthly compensation, in an
amount deliberated by the Nomination and Compensation Committee and determined by the
Board of Directors.

iii.

Policy concerning the determination of the details and amount or method used to calculate thequantity of performance-linked compensation (including the policy concerning thedetermination of the timing and conditions for the payment of compensation, etc.)
The benchmark for the payment of performance-linked compensation is the ability of theCompany to pay dividends, which are calculated based on separately-established allocation
standards for profit, using profit attributable to owners of parent. The performance benchmark
is selected to raise awareness of the performance improvement for each fiscal year, contributeto the improvement of corporate value, and share benefits with all stakeholders.
Performance-linked compensation is paid as a bonus at a predesignated time each year, in an- 13 -

amount calculated in accordance with performance for each fiscal year.
The target of the benchmark for the payment of performance-linked compensation for thecurrent fiscal year (97th fiscal year) was based on payment of dividends with approximately
30% of a consolidated payout ratio. Dividends from surplus were not paid as loss attributableto owners of parent of 5,026 million yen was posted. Accordingly, bonuses for officers were
not paid to six Directors (excluding Outside Directors) in accordance with the policy on
Directors’ compensation.
iv.

Policy on the determination of the proportional amounts of monetary compensation andperformance-linked compensation for individual Directors
a. Monthly fixed compensation◇ Basic compensation for officers
 An amount of fixed compensation based on position, corresponding to the level of
dutiesb. Performance-linked compensation◇ Bonuses for officers (monetary) Performance-linked monetary compensation based on single fiscal year
performance, etc. as a short-term incentive
 Limited to a maximum of the sum of individual monthly fixed compensation forfive months
 Compensation is paid after the Company’s results, etc. have been determined ineach fiscal year
◇ Bonuses for officers (stock) Performance-linked stock compensation based on points awarded, while in office,for the delivery of shares, to promote the sharing of benefits and risks withshareholders from a medium- to long-term perspective
 Shares are delivered to Directors upon retirement
Regarding the ratio by compensation type, the ratio of fixed compensation to performancelinked compensation is in the range between 10:0 and 7:3.

v.

Matters concerning the determination of details of Directors’ compensation, etc.
Proposals for monthly compensation for individual Directors are submitted to the Nomination
and Compensation Committee by the President and Representative Director, based on careful
evaluation of the roles expected of each Director by the Company. The Nomination andCompensation Committee, upon deliberation, determines compensation for individual
Directors, and the President and Representative Director submits a proposal for the paymentof the aggregate amount to the Board of Directors, which decides it.
The aggregate amounts of bonuses for officers, which are performance-linked compensation,
are determined in accordance with the allocation standards. The President and Representative
Director submits a proposal for the payment of the aggregate amount to the Board of
Directors, which decides it. The amounts allocated to individual Directors are determined inproportion to the monthly fixed compensation for each position.

3) Matters concerning resolutions by the General Shareholders Meeting on compensation, etc. for
Directors and Auditors
The 80th Annual General Shareholders Meeting on June 29, 2006 passed a resolution to stipulatethat the amount of monetary compensation for Directors of the Company shall be up to 350
million yen per year (excluding the portion of employee salary of Directors who concurrently
serve as employees). The maximum number of Directors as of the conclusion of that Annual
General Shareholders Meeting was ten, including one Outside Director.
The 80th Annual General Shareholders Meeting on June 29, 2006 passed a resolution to stipulatethat the amount of monetary compensation for Auditors of the Company shall be up to 60 million
yen per year. The maximum number of Auditors as of the conclusion of that Annual General
Shareholders Meeting was four.
4) Matters concerning the delegation of decisions on compensation, etc. for individual Directors- 14 -

Regarding the amounts of compensation, etc. for individual Directors of the Company, theNomination and Compensation Committee, delegated authority by the Board of Directors,
deliberates on proposals for the aggregate amounts of compensation for each period, based on theseparately-established policy on Directors’ compensation. The President and Representative
Director submits the results of this deliberation to the Board of Directors, which decides theamounts of compensation, within the total compensation limit resolved by the General
Shareholders Meeting.
Authority is delegated to the Nomination and Compensation Committee, a non-statutory advisory
body of the Board of Directors composed of a majority of Outside Directors, to ensure thefairness, transparency, and objectivity of processes related to the determination of compensation,
etc.
The Board of Directors has measures in place to ensure that the Nomination and Compensation
Committee appropriately exercises this authority, with the President and Representative Director
submitting the results of the Committee’s deliberation to the Board of Directors for decision.
Because the amounts of individual Directors’ compensation are determined according to theseprocedures, the Board of Directors believes that they are in line with the determination policy.
For the current fiscal year, the Nomination and Compensation Committee (Chairperson: Outside
Director Shinya Matsumoto; Members: Outside Director Hikari Imai, Outside Director Yukari
Sakai, President and Representative Director Masayuki Aoyama) has determined the details ofcompensation, etc. for individual Directors. The scope of this authority is stipulated under theCommittee Regulations as the compensation system basic policy, proposals for compensation
limits (including calculation methods), and specific individual compensation amounts (including
calculation methods).
[Supporting System for Outside Directors or Auditors]
Although there are no dedicated sections or persons to support Outside Directors or Outside Auditors, theadministrative office of the Board of Directors announces the scheduled dates of all Board of Directors’
meetings; sends a convocation notice which describes matters to be resolved and matters to be reported indetail within a predetermined period of time; ensures the attendance of all Directors to the meetings; andpromptly issues the copies of the minutes of the Board of Directors’ meetings.
[Retired President and Representative Director holding advisory positions]
Information on retired President and Representative Director holding advisory positions

Name
Akira Sasaki

Job title/
position

Responsibilities

Honorary Akira Sasaki provides
Advisor counsel on management
and other matters in
response to requests,
leveraging his long yearsof experience andknowledge in the
management of theCompany.

Number of President and Representative Directors
holding advisory positions (sodanyaku, komon, etc.)

Employment terms Date when
(Full/part time,
former roleTermwith/without
as President
compensation, etc.)
endedPart time with
June 25, 2020 July 1, 2022 tocompensation
June 30, 2025
(Served as
Executive
Adviser from
June 26, 2020
to June 30,
2022)

1

Others The Company may appoint persons as Advisors, Senior Advisors, etc., as deemed necessary by theCompany, by the resolution of the Board of Directors.
 The Company has laid out internal rules regarding Advisors and Senior Advisors.
- 15 -

2. Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Compensation
Decisions (Overview of Current Corporate Governance System) UPDATED(1) Overview of current corporate governance system of the Company and reasons for the adoption of thesaid system
The basic policy of the Company is to enhance the corporate governance centering around a director
and auditor system, and to establish a fair and transparent management organization.
(2) Board of Directors
The Board of Directors consists of nine Directors (including three Outside Directors). In addition tomonthly Board of Directors’ meetings, Directors hold meetings as needed for prompt handling ofmatters, efficient execution of duties, and monitoring of the execution of duties among Directors.
The frequency of the meetings and the attendance of individual Directors are described in the Notice ofConvocation of the Annual General Shareholders Meeting.
(3) Board of Auditors
The Company has adopted an auditor system, and three persons out of four Auditors comprising theBoard of Auditors are Outside Auditors. In order to ensure the fair execution of duties by Directors, theCompany enables all Auditors including part-time Auditors to attend all Board of Directors’ meetings.
(4) Nomination and Compensation Committee
The Company has established the Nomination and Compensation Committee, aiming at enhancing thefairness, transparency, and objectivity of procedures for the nomination and compensation of Directors
and Executive Officers, as well as at further improving corporate governance. In response to inquiries
from the Board of Directors, the Nomination and Compensation Committee primarily deliberates onmatters related to the appointment and dismissal of Directors and other officers, the compensation of
Directors, and matters approved by other committees regarding the nomination and compensation of
Directors.
(5) Internal Control Committee
The Company has established the Internal Control Committee as an advisory body to the Board of
Directors to ensure “compliance with laws and regulations in corporate activities,” “securing thereliability of financial reports,” and “securing the effectiveness of duties” of the Group. The Internal
Control Committee reports on its activities to the Board of Directors twice or more per year.
(6) Risk Management Committee
The Company has established the Risk Management Committee, aiming at enhancing and continuously
implementing the risk management system in order to correctly understand all possible risks, lower the
possibility of their occurrence, devise measures to reduce probable losses before they occur, and when
they occur, perform thorough crisis management, minimize the damage, and take responsible measuresfor early recovery. In the event of the risk occurrence of a critical situation or the rise of the possibilityof that, the Company will establish the Crisis Management Headquarters to implement emergency
measures.
(7) Internal audit system and collaboration with Auditors and an audit firm
Regarding internal audits, the Company has established the Internal Audit Dept. (consisting of two
persons) to implement organizational and system audits, operational audits, and accounting audits, aswell as the “evaluation of internal control concerning financial reports” of the overall Group, among
other activities.
Regarding auditor’s audits, four Auditors led by one full-time Auditor prepare an annual audit plan andconduct audits based on the plan.
Regarding mutual collaboration among Auditors, the Internal Audit Dept., and the Accounting Auditor,
the Company holds audit report meetings four times a year to promote collaboration among them. In
order to promote mutual collaboration between Auditors and the Internal Audit Dept., the Company has
established occasions for information exchange as needed, enabling them to check the progress of theaudit plan and make proper adjustment. The evaluation results of internal audits are regularly reported
to the Board of Directors’ meetings.
The Internal Audit Dept. reports the status of audits to Outside Directors through the Board of- 16 -

Directors.
(8) Accounting audits, etc.
Name of audit firm: KPMG AZSA LLC
Certified public accountants who executed duties: Kusano Kazuhiko, Okano Takaki
Composition of assistants of audit works: The assistants engaged in audit works for the Company are
six certified public accountants and seven other persons belonging to the firm.

3. Reasons for Adoption of Current Corporate Governance System
The Company has adopted an auditor system in light of the scale of the organization. The Company has
adopted the current corporate governance system, aiming to ensure that internal control works properly
through introducing an executive officer system to separate the functions of decision-making and businessexecution, and through appointing Outside Directors to strengthen the oversight function of businessexecution.

III. Implementation of Measures for Shareholders and Other Stakeholders
1. Measures to Vitalize the General Shareholders Meetings and Smooth Exercise of Voting Rights
UPDATED
Supplementary Explanations
Early Notification of General
The Company mails the convocation notice approximately three weeks
Shareholders Meeting
prior to the date of the General Shareholders Meeting. The Company
takes measures for electronic provision of information contained in thereference documents for the General Shareholders Meeting and posts
the information on the Company’s website or the website of the Tokyo
Stock Exchange in advance of mailing the convocation notice.
Scheduling of the General
The General Shareholders Meeting is held on a non-peak day.
Shareholders Meeting on a
Non-Peak Day
Allowing Electronic Exercise
The electronic exercise of voting rights (such as via the internet) hasof Voting Rights
been made available.
Participation in a Platform for
The Company has participated in the platform for the electronic
the Electronic Exercise of
exercise of voting rights operated by ICJ, Inc.
Voting Rights and Other
Initiatives to Enhance
Environment for Institutional
Investors to Exercise Voting
RightsProviding Convocation Notice The convocation notice is translated into English and posted on thein English
Company’s website or the website of the Tokyo Stock Exchange with
the information contained in the reference documents for the General
Shareholders Meeting.
2. IR Activities UPDATED
Supplementary Explanations
Regular Investor Briefings forAnalysts and Institutional
Investors

The Company plans to hold regular briefings twice ayear, and plant tour (Hachinohe Works) once a year.

Posting of IR Materials on
WebsiteConsolidated financial results, timely disclosurematerials, results presentations for securities analysts
and institutional investors(https://www.pacific-metals.co.jp/en/ir/index.html)- 17 -

Explanation byRepresentativeYesEstablishment of Department
and/or Manager in Charge ofIR

Name: IR Committee

Other Conducting IR individual interviews with analysts
and institutional investors
 Promoting constructive dialogue with shareholders
in accordance with the “basic policies on corporate
governance”
 Holding a financial results briefing session twice ayear and conducting individual interviews
 Improving quarterly disclosure and IR materials,
including disclosure in English
 Renovating the Company’s website and IR site aswell as translating the sites
 Feeding back the status and results of IR activities
to the Board of Directors

3. Measures to Ensure Due Respect for Stakeholders UPDATED
Supplementary Explanations
Stipulation of Internal Rules
The Company has set internal rules in the “basic policies on corporate
for Respecting the Position of
governance” and the Corporate Code of Conduct.
Stakeholders
The Company acquired the accreditation of ISO14001 in March 2009, andImplementation ofhas been working actively on the reduction of environmental burdens.
Environmental Activities, CSR The Company has also prepared the Integrated Report and posted it on the
Activities, etc.
Company’s website.
(https://www.pacific-metals.co.jp/en/sustainability/report.php)

IV. Matters Related to the Internal Control System
1. Basic Views on Internal Control System and the Progress of System Development UPDATED
Status of development of internal control system and risk management system(i) System of retention and management of information concerning the execution of duties of the Directorsof the Company
 Reports related to the execution of duties of Directors are posted in writing or in electronic media.
 The information concerning the execution of duties of Directors is retained and managed according to
the document control procedures and other internal rules of the Company.
(ii) Rules and other systems concerning the management of risk of loss of the Company
 In order to cope with major accidents, disasters, and scandals, the Company has set the Risk
Management Committee which takes measures at normal times, and the Crisis Management Manual
which prescribes our basic response in emergency situations.
 Business management risks are presented to the Board of Directors to determine countermeasures.
 Daily operational risks are managed through creating management rules and business execution
manuals, etc.
(iii) System to secure the efficient execution of duties of the Directors of the Company and its subsidiaries
 The Company has introduced an executive officer system to vitalize the Board of Directors throughclarifying that the role of the Board of Directors is to determine the overall corporate management
policies and supervise business execution. The Company works to accelerate decision-making andenhance the business execution function at the practical level through clarifying the roles andresponsibilities of persons responsible for business execution.
 In the business management of the Company, the Management Planning Committee consisting of
Directors and the General Manager of the department in charge formulates operation policy andmanagement plan. The Board of Directors discusses and determines the said policy and plan, and theCompany executes business systematically and organizationally based on them. Executive Officers incharge regularly report the progress of business execution to the Board of Directors for verification.
 The Company has set basic rules and other things concerning IT control in order to secure the efficiencyof the business execution of the Company and its subsidiaries.
- 18 -

 The Company has formulated rules and introduced a teleconference system between the Hachinohe
Head Office and the Tokyo Head Office in order to enable the participation of Outside Directors to all
the Board of Directors’ meetings for decision-making.
(iv) System to secure the execution of duties of Directors and employees of the Company in compliancewith laws and regulations and the articles of incorporation of the Company.
 The Board of Directors has set the Management Policy, the Corporate Code of Ethics, and the Standardof Corporate Conduct, among others.
 The Company works to enhance compliance through establishing the Internal Control Committee as astructure to secure the execution of duties of the Directors and employees in compliance with laws andregulations and the articles of incorporation of the Company.
 The Company eliminates any relationship with anti-social forces and other similar groups that threaten
the order and safety of civic society, and rejects any requests from them. The Company has establisheda contact point, centrally managed information, and always collaborated with the police, the Tokyo
Metropolitan Police Department’s Special Violence Prevention Countermeasures Association(Tokubouren), and external expert institutions.
 The Company has introduced a teleconference system between the Hachinohe Head Office and theTokyo Head Office in order to enable the participation of Outside Directors to all the Board of
Directors’ meetings for decision-making.
 The Company has established the Internal Audit Dept. under the direct control of the Board of Directors
to implement “organizational and system audits,” “operational audits,” “accounting audits,” and “daily
monitoring” in collaboration with Auditors.
 The Company has established a whistle-blowing system (internal and external contact points) based on
the Rules of Whistle-blowing System. Whistle-blowing reports are submitted to the Board of Auditors,
and specific cases are reported to the Board of Directors. Disadvantageous treatment of whistle-blowers
is prohibited.
(v) System to secure the appropriateness of duties at the Group The Company has established a system to secure the appropriateness of duties of subsidiaries throughdeploying persons in charge of internal control and crisis management at its subsidiaries under theguidance of the Company and making the persons attend the Internal Control Committee and the Risk
Management Committee.
 The Internal Audit Dept. of the Company implements audits in order to secure the appropriateness ofduties at consolidated subsidiaries.
 Directors of each consolidated subsidiary regularly report the operating conditions of the consolidated
subsidiary to the Board of Directors.
 The Company has established a whistle-blowing system (internal and external contact points) based on
the Rules of Whistle-blowing System. Whistle-blowing reports are submitted to the Board of Auditors,
and specific cases are reported to the Board of Directors.
The whistle-blowing system covers matters concerning subsidiaries, affiliated companies, and business
partners, and other related entities. The Company prohibits disadvantageous treatment of whistleblowers in association with such internal reporting.
(vi) System of employees to support the duties of Auditors of the Company
 At the requests of Auditors, the Company may appoint employees belonging to the Internal Audit Dept.
as persons to support the duties of Auditors, in order to strengthen the collaboration between Auditors
and the Internal Audit Dept., and cause the employees to support Auditors to the degree that it does notnegatively affect their primary duties. The Board of Directors exchanges opinions with the Board ofAuditors as needed.
(vii) System for Directors and employees of the Company to report to Auditors of the Company
 Directors of the Company immediately report to Auditors in accordance with laws and regulations,when they identify facts which may cause substantial damage to the Company.
 Directors of the Company allow Auditors to attend the Board of Directors’ meetings and otherimportant meetings. Directors follow the instruction of Auditors with regard to the inspection of
Auditors’ important documents and the investigation into the business and assets of the Company.
 As regards whistle-blowing reports to Auditors, employees, etc. of the Company; directors, auditors,
and employees, etc. of its subsidiaries; and those who have received reports from them are not treateddisadvantageously.
 The Company promptly processes the prepayment and redemption of expenses incurred in connection
with the execution of duties of Auditors, expenses for the execution of the said duties, and debt
- 19 -

disposal.
 For the fair execution of duties of Directors of the Company, the Company enables all of the four
Auditors (of which three are Outside Auditors) including part-time Auditors to attend all Board of
Directors’ meetings.
(viii) System to secure the reliability of financial reports of the Company
 In order to secure the reliability of financial reports of the Group, the Company sets various related
rules; identifies and manages the risks of causing fraud or error in financial reports; designs, operates
and evaluates prevention and monitoring functions; and correct deficiencies, if any.

2. Basic Views on Eliminating Anti-Social Forces UPDATEDThe Company eliminates any relationship with anti-social forces and other similar groups that threaten theorder and safety of civic society, and rejects any requests from them. The Company has established acontact point, centralized management of information, and always collaborated with the police, Tokubouren,
and external expert institutions.

- 20 -

V. Other
1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not Adopted

Supplementary Explanation—

2. Other Matters Concerning Corporate Governance System
Overview of timely disclosure system(1) Regarding information on decisions made by the Company (including information on subsidiaries),
respective divisions in the Company prepare materials and the Director in charge reports the contents to theGeneral Administration Dept. The General Administration Dept. decides whether the information requires
disclosure in consultation with the Finance and Accounting Dept. and the person in charge of information
handling; prepares materials to submit to the Board of Directors based on the decision; submits to the Boardof Directors materials with the opinion on the necessity of disclosure; obtains approval of the Board of
Directors including the necessity of disclosure; and files the timely disclosure materials with the Tokyo
Stock Exchange when disclosure is necessary.
(2) Regarding information on facts which may affect the investment decisions of investors (including
information on subsidiaries), the Director in charge reports to the General Administration Dept. The General
Administration Dept. decides whether the information requires disclosure in consultation with the Financeand Accounting Dept. and the person in charge of information handling; prepares materials to submit to theBoard of Directors based on the decision; submits to the Board of Directors materials with the opinion on
the necessity of the disclosure; obtains approval of the Board of Directors including the necessity of
disclosure; and files the timely disclosure materials with the Tokyo Stock Exchange when disclosure isnecessary.
(3) Regarding information on financial results, the Finance and Accounting Dept. prepares materials anddecides whether the information requires disclosure in consultation with the General Administration Dept.
and the person in charge of information handling; submits to the Board of Directors materials with theopinion on the necessity of disclosure; and obtains approval of the Board of Directors including thenecessity of disclosure. The General Administration Dept. files the timely disclosure materials with theTokyo Stock Exchange when disclosure is necessary.

- 21 -

- 22 -